Time Warner plans to begin selling Internet phone service in California next year and will cooperate with regulators by seeking a telephone operator's license in the state, if necessary.

The company's plans were included in a report presented Thursday at a hearing of the California Public Utilities Commission (CPUC), which is examining whether to regulate voice over Internet Protocol (VoIP) service providers that do business in the state. The commissioners are gathering information to prepare a final policy position at an undisclosed future date.

Although the issue remains unsettled, Time Warner said it would comply with any position the agency ultimately adopts, including submitting to regulation.

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"We don?t think it's a good idea to regulate VoIP right now. We want a debate and full airing," said Peter Casciato, an attorney representing Time Warner Cable, who attended the hearing. "(But) we want to be a very good corporate citizen."

Time Warner's plans come as come as states across the country are wrestling with companies that deliver telephone service over the Internet rather than traditional phone lines, threatening taxes that pay for universal service subsidies, 911 emergency services and other government programs.
Within five years, California regulators will collect 20 percent less in universal service fees each year if VoIP's popularity reaches its predicted levels, CPUC Telecommunications Division Director John Leutza told commissioners Thursday.

States suffered a setback earlier this year, when a federal judge ruled that a VoIP service offered to Minnesota residents is exempt from local telephone regulations. The CPUC discussed the U.S. District Court decision Thursday during a session closed to the public.

California is the largest state to weigh in on the issue, having asked half a dozen VoIP providers to obtain telephone operator licenses. Those companies have instead challenged the request, arguing that they fall under the definition of information service providers rather than voice service providers.

Cable companies are expected to be among the biggest providers of VoIP service, which they can offer in so-called triple-play bundles that combine voice with broadband and video. Time Warner began testing VoIP services earlier this year, while Cablevision Systems this week began marketing VoIP service to all its subscribers.

Although cable giants are showing increasing interest in VoIP, small providers such as Vonage Holdings have been carrying the fight against state regulators. A spokeswoman for VoIP provider 8x8 said Thursday that the company would welcome regulation of Time Warner if it launches VoIP service in California, but she added that Time Warner's openness to regulation should not affect the ultimate outcome of the debate.

"We'd rather they (register as a phone company)," said 8x8 attorney Christy Kunin. "But we don?t think it will derail what we are trying to do."